Social Capital and the Economy

There is even a strong case to be made saying that social capital is good for the economy. Temkin and Rohe argue that the creation and existence of social capital is a key factor in neighborhood stability. They found that neighborhoods with high levels of social capital thrive and develop, while those with low levels do not. In their words, "building social capital is an effective way to stem a neighborhood's decline.” This is especially true in a networked economy, where who you know is more important than ever. Jobs are found through word of mouth, obtained through references and recommendations and kept by cultivating and exploiting large rolodexes. Social capital and the behavior a dearth of it inspires strongly affect economies. Putnam’s original studies comparing an economically successful Northern Italy and a struggling Southern Italy highlights this economic impact of social capital.

Allan Friedman
January, 2002